Richard Sneider - CFO John Fan - Chairman, President and CEO.

Josh Buchalter - Needham & Co. Matt Robison - Wunderlich Securities.

Good morning and welcome to Kopin Corporation's Second Quarter 2015 Conference Call. Today's call is being recorded for Internet replay. You may access an archived version of the call on Kopin’s website at www.kopin.com. With us today from the company are Chairman and Chief Executive Officer, Dr. John C.C. Fan; and Chief Financial Officer, Mr.

Richard Sneider. Please go ahead..

Thank you. Welcome everyone and thank you for joining us this afternoon. John will begin today's call with a discussion of our strategy, technology and markets. I will go through the 2015 fiscal second quarter results at a high level, John will conclude our prepared remarks, and then we'll be happy to take your questions.

I would like to remind everyone that during today's call, taking place on Tuesday, August 04, 2015, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

These statements are based on the Company's current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements.

Potential risks include, but are not limited to, demand for our products, operating results of our subsidiaries, market conditions and other factors discussed in our most recent Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission.

The Company undertakes no obligation to update forward-looking statements made during today's call. And with that, I'll turn the call over to John..

Thank you for joining us today. I am actually calling today from Asia having just completed about three weeks of meeting with a private field Tier 1 customer for the enterprise and customer world.

My meetings here were to both understand how the program whereby assisting customer are proceeding and also to initiate the discussion with potential partners and customers. I could not be more excited about the ton of response at all of these meetings. My visit confirmed yet again that the wearable market for handset products has great potential.

During my meetings, I presented Kopin's strategy that under NDA different products that we will be looking on including our audio, topic display, battery and other components, and along with our latest system design. One point was consisted of having meeting, the importance of voice technology.

All of the companies I spoke with have told us they wanted to use voice as a critical interface and all are extremely impressed with Kopin's unique voice technology.

Great response from those meetings in Asia with the achievement we have in technology development, the shipment of our products through two new Tier 1 enterprise wearable companies and our strong cash position. We could not be more pleased with our progress in the second quarter and the first half of 2015.

We achieved the position to be a leading technology provider for the growing wearable market. We also had another strong quarter in our military business, which has now been our technology driver in developing the expertise in wearable technology.

With the initial shipment through the two Tier 1 companies that we're now moving from product development into manufacturing of our handset components despite it being significant investment in R&D, our balance sheet has never been stronger with $88 million of cash and marketable securities as of Q2.

Our strong balance sheet refers to the next stage in our strategy. As we move from R&D in handsets, to manufacturing and sales. At a critical stat of our successful technology company and the transition we've accomplished several times before.

We also spend on cash and paid an institution due to Intel's purchase of Recon Instruments, which has now been a key partner and customer for Kopin. This is yet another example of a major corporation increasing debt commitment to wearable.

We look forward to continue to work with Recon after transaction, especially as the ability to expand their product line now increasing over Intel's results behind them.

Piper Jaffray in their recent industry report on wearable that we believe wearable technology represent next generation of devices, which are how individual consume and use information and we cannot agree more.

During my meetings in Asia almost all the companies confirmed [that] [ph] is the ultimate wearable in a lot of respect in evolving for our dependence on [stock] [ph] through a device that allow us to be hands free and without being hit us with small screen.

With Kopin's display technology, we’ve achieved a minuscule artist that can duplicate the benefit of the screen in a smartphone or a tablet.

We can repair with this our new audio technology interface, which allows voice to be effectively replaced touch and our technology with the capacity enabling Kopin a tablet to create innovative and less rates wearable handset.

The timing on this potential customer is overwhelming and I am excited to take -- I am excited to take this early strong interest to the next level. In addition many of these pilots see opportunity to leverage our audio technology much beyond handsets, which bring additional revenue to monetize our investment. We are in a very enviable position.

We surprised a leading Tier 1 customer in the headset market. Motorola was our first Tier 1 enterprise customer utilizing our components and realizing their components, our system technology in their headsets. We made this year -- we just did a rollout in their enterprise headset in Japan. Again this licensing technology approaches our components.

This becomes our second Tier 1 customer.

During this quarter, we also completed our initial shipment for our third Tier 1 customer and in fact we purchased Recon, I think you could say we now have smaller Tier 1 customers.\ Without question, Kopin has a dominant position within the enterprise market, as the controlled supplier, licenses of contract system and develop new technology.

In Q2 alone Kopin had six new patents branded and five new ones for a total going at 300 patents and patent pending. We're seeing a component supplier and license with the enterprise market on only one part of our strategy.

Kopin has long recognized the simple fact for our consumer to succeed the demand for something that consumer wants and is willing to wear. So ton of our investments have been in developing a headset that looking, fashionable and comfortable. They are our smart handsets.

We have previously demonstrated several compact systems and in September this year, we plan to show our latest system target at Health and Fitness bucket in the Interbike Trade Show. Turning to our monitory, much of our wearable expertise can be developed through our military business.

Military has not only been in Poland by the financial success, but it has been tempting for us and the development channel for the display, optics and other related technologies we are now heading to the enterprise and customer market.

In Q2, we shipped SXGA display for use in the F-35 fighter plane to provide pilots with a fixed helmet which are critical to operate in this high tech plane. We are so sold of this display to their F-35. We have also made solid progress in reaching license agreements for precision acquisition target system or tech recall.

Potential pilots have been very keen with the results of their tests. And our [reality] [ph] systems while improving time equity for rifles and guns. We're on track to begin revenue generation next year after securing license agreements in the second half of this year.

Our assignment for the second half of this year continues to grow and therefore our many discussions are in Asia over the past week for this alliances and revenue for 2016. We're trying to demonstrate our technologies anniversary celebrations this year. We will provide details shortly and I hope to see many of you there.

With that I would now turn the call to Rich to review the financial results of Q2..

Thank you, John, Beginning with the results for the quarter; total revenue for the second quarter of 2015 was $10.9 million compared with $6.9 million for the second quarter of 2014.

The increase in Q2 revenue year-over-year was primarily driven by initial shipments of products with Tier 1 enterprise customer and continued shipments of our products used in thermal weapon sights. Included in the 2015 revenue was $3.8 million paid by a customer to offset cost incurred due to customer's lower forecasted program volume.

Cost of goods sold for the second quarter was 67% of product revenues compared with 87.7% for the second quarter of last year. The improvement was due to the additional margin from the $3.8 million and the increase in sales of military products, which have higher growth margins as compared to our other products.

R&D expenses in the second quarter of 2015 were $4.9 million compared with $5.1 million in the second quarter of 2014, essentially flat year-over-year. SG&A expenses were $5.1 million in the second quarter of 2015 compared to $4.9 million in the second quarter of 2014.

The increase in the second quarter of 2015 as compared to the same quarter of 2014 was primarily due to an increase in compensation, pattern, information technology and travel expenses, which were partially offset by lower stock compensation expense.

Other income expense was income of $6.2 million for the second quarter of 2015 as compared with an expense of $1.6 million for the second quarter of 2014.

The second quarter of 2015 included approximately $5.5 million gain from the sale of an investment in the second quarter of 2014, included approximately $1.3 million non-cash impairment of an investment.

The second quarter of 2015 includes approximately $500,000 of foreign currency gain as compared to approximately $700,000 of foreign currency losses in 2014.

Turning to the bottom line, our net income for the quarter was approximately $800,000 or $0.01 per fully diluted share, compared with a net loss of $8.8 million or $0.14 per diluted share in the second quarter of 2014.

As John mentioned, we concluded the quarter with approximately $88.3 million in cash and marketable securities and we anticipate receiving the final $15 million payment from the sale of our three, five [KTC] [ph] businesses in January 2015. So we continue to maintain a strong cash and security position in order to execute our strategy.

And with that, I will turn it back over to John..

Now I think we'll open for Q&A questions.

Operator?.

[Operator Instructions] Our first question comes from Rajvindra Gill with Needham & Co. Please proceed..

Hi, this is Josh Buchalter on behalf of Rajiv. Thanks for taking my question and congratulations on this all progress. Could you maybe elaborate a little bit more on what we should expect going forward from these two Tier 1 customers that led to the revenue this quarter? Thank you..

Well, we've continued to purchase orders through the remainder of the rest of the year. We have not given guidance and at this point in time we're still not going to give revenue guidance, but we have continued orders through the end of the year for both customers..

Okay. And I guess last year there was a solid ramp of military in the second half, should we expect a similar kind of ramp for anything you could provide on military would be helpful. Thank you..

We have orders through the third quarter. As we said at the beginning of the year, it's much more hand to mouth this year than it has been in prior years. So we will see what turns up there in the quarter. So right now the fourth quarter is open..

Okay. Thank you. And then lastly, could you maybe elaborate on what kind of applications these variables are used for with either Fujitsu or the other customer? Thank you and congratulations again..

Yes, Fujitsu is actually heavy enterprise. They are not primarily so in Japan and they say their response was extremely overwhelmingly heavy. So they're used for repaid and maintenance especially repair and also record keeping..

Okay. Great. Thank you..

Thank you. Our next question comes from Matt Robison with Wunderlich. Please proceed..

Thanks for taking my question.

So looking at the segment breakdown, it looks like the $3.8 million payment in the variable category since the other ones have bank use that and was that it sounds like you still got some business with their customer, was that a catch-up based on level of volume they did in the first half or does that refer to the forecast level that you're looking at for the next six months?.

It's based upon the forecasted level when we entered into the program actually in 2014. So they had expected volumes in 2015. We committed resources and capacity and then they reduced the forecast. So it's a simple matter than number of units goes down, the price goes up,.

So they reduced -- what period was it, the very recent forecast reduction?.

We couldn’t get into why they changed the forecast. They just changed it..

Oh, that's the timing, I didn't ask why.

So when was the timing of the forecast reduction?.

In Q2..

Okay.

And so what should we be just it's been a fair amount of media activity surrounding your largest customer from last year and from the first half, I guess is that I guess is that -- next question is, is that still the same? Is that largest customer still the same customer and when you look at that forecast reduction, I guess the question is, is it referred to the whole year or just to confirm is it the first half that it relates to?.

Well, just to be clear, I believe our largest customer was Recon last year and we only disclosed size of the customer at year end. So I don't know if Recon is what you're referring to….

Well, no its not and that’s a little bit of confusion but 10% customer discussion included another one. So I'll take that offline.

So what -- when do you expect to see volume from your second Tier 1?.

We’re shipping now I think, John indicated that if you include Recon's acquisition by end of another Tier 1 we have four Tier 1 customers and we’re making shipments during the course of the year to all..

And John you said that I think you used the work heavy in terms of the demand for this, does that mean that they're back in reordering already?.

Yeah, I think that demands maybe I should put it based on interest and designing cycles through right now, it was steady assumed number of companies -- big companies that would be interested, it's just had to be many times heavier than that. So everybody is very happy and that should be depend if they're successful.

A lot of companies are going to follow through now..

Thank you..

Thank you. There are no further questions. I would like to turn the floor back over to Management for closing comments..

Yeah, thank for joining us this morning. And hope to see guys soon. Thank you..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation..